Evan Paul and his wife entered 2022 thinking it would be the year they would finally buy a home.
The couple — both scientists in the biotech industry — were ready to put roots down in Boston.
“We just kind of got to that place in our lives where we were financially very stable, we wanted to start having kids and we wanted to just kind of settle down,” says Paul, 34.
This year did bring them a baby girl, but that home they dreamed of never materialized.
High home prices were the initial insurmountable hurdle. When the Pauls first started their search, low interest rates at the time had unleashed a buying frenzy in Boston, and they were relentlessly outbid.
“There’d be, you know, two dozen other offers and they’d all be $100,000 over asking,” says Paul. “Any any time we tried to wait until the weekend for an open house, it was gone before we could even look at it.”
Then came the Fed’s persistent interest rates hikes. After a few months, with mortgage rates climbing, the Pauls could no longer afford the homes they’d been looking at.
“At first, we started lowering our expectations, looking for even smaller houses and even less ideal locations,” says Paul, who eventually realized that the high mortgage rates were pricing his family out again.
“The anxiety just caught up to me and we just decided to call it quits and hold off.”
Buyers and sellers put plans on ice
The sharp increase in mortgage rates has cast a chill on the housing market. Many buyers have paused their search; they can longer afford home prices they were considering a year ago. Sellers are also wary of listing their homes because of the high mortgage rates that would loomover their next purchase.
“People are stuck,” says Lawrence Yun, chief economist with the National Association of Realtors.
Yun and others describe the market as frozen, one in which home sales activity has declined for 10 months straight, according to NAR. It’s the longest streak of declines since the group started tracking sales in the late 1990s.
“The sellers aren’t putting their houses on the market and the buyers that are out there, certainly the power of their dollar has changed with rising interest rates, so there is a little bit of a standoff,” says Susan Horowitz, a New Jersey-based real estate agent.
Interestingly, the standoff hasn’t had much impact on prices.
Home prices have remained mostly high despite the slump in sales activity because inventory has remained low. The inventory of unsold existing homes fell for a fourth consecutive month in November to 1.14 million.
“Anything that comes on the market is the one salmon running up stream and every bear has just woken up from hibernation,” says Horowitz.
But even that trend is beginning to crack in some markets.
At an open house for a charming starter home in Hollywood one recent weekend, agent Elijah Shin didn’t see many people swing through like he did a year ago.
“A year ago, this probably would’ve already sold,” he says. “This home will sell, too. It’s just going to take a little bit longer.”
Or a lot longer.
The cottage first went on the market back in August. Four months later, it’s still waiting for an offer.
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STEVE INSKEEP, HOST:
This country’s home-buying frenzy is really, definitely over. Home sales have fallen for 10 straight months. It’s the longest streak of declining sales in more than two decades. NPR’s Arezou Rezvani spoke with buyers and sellers.
AREZOU REZVANI, BYLINE: Thirty-four-year-old Evan Paul went into 2022 thinking this would be the year his family would finally buy a home.
EVAN PAUL: We just kind of got to that place in our lives where we were financially very stable. We wanted to start having kids, and we wanted to just kind of settle down.
REZVANI: Paul and his wife, who both work in the biotech industry, did end up having a baby, a little girl, just a couple of weeks ago. But they never did move up and out of their two-bedroom condo. Initially, it was because of high home prices in their city of Boston. A year ago, low interest rates unleashed a home-buying frenzy, and they were outbid every time.
PAUL: There’d be, you know, two dozen other offers, and they’d all be $100,000 over asking.
REZVANI: Then the Fed started raising interest rates. And after a few months, it was the high mortgage rates that priced the Pauls out again.
PAUL: Yeah. Eventually, the anxiety just caught up to me. And we just decided to call it quits and hold off.
LAWRENCE YUN: There are far fewer buyers in the marketplace.
REZVANI: That’s Lawrence Yun, chief economist for the National Association of Realtors. He says while buyers like the Pauls have been pulling back, sellers are also reluctant to jump into the market because they’d also be slammed by a pricey mortgage.
YUN: To reenter the market today, they would have to give up that 3% and possibly get the new loan at much higher interest rates.
REZVANI: And that right there is what’s contributing to something of a freeze in the housing market, says Susan Horowitz, a New Jersey-based real estate agent.
SUSAN HOROWITZ: The sellers aren’t putting their houses on the market. And the buyers that are out there – certainly, the power of their dollar has changed with rising interest rates. So there is a little bit of a standoff.
REZVANI: Surprisingly, that standoff hasn’t had much of an impact on prices. Home prices have remained high despite the slump in sales activity.
HOROWITZ: Because there’s no inventory. So anything that comes on the market is the one salmon running upstream. And every bear has just woken up from hibernation.
REZVANI: But even that trend is beginning to crack in some markets.
It’s been slow going lately at agent Elijah Shin’s open house in Los Angeles, where he sweeps the sidewalk, waiting for the occasional visitor to swing by.
ELIJAH SHIN: Well, I think we’re in the transition again. And, of course, no one knows the future, but we do look like we need a market correction here and there. It was a few crazy years.
REZVANI: He gives a thorough tour to anyone who comes through…
SHIN: And this can be a closet. And this is the entire master suite.
REZVANI: …And connects with prospective buyers however he can.
SHIN: You want a flyer? We’ll be here Tuesday and Thursday if you want to…
REZVANI: But things are just different now.
SHIN: Well, a year ago, this property would’ve already been sold. I think this home will sell, too. It’s just going to take a little bit longer.
REZVANI: Or a lot longer. This little starter home in one of the more coveted neighborhoods of Hollywood first went on the market back in August. Four months later, it’s still waiting for an offer. Arezou Rezvani, NPR News, Los Angeles.
(SOUNDBITE OF KYLE MCEVOY AND EZZY’S “GARDEN”) Transcript provided by NPR, Copyright NPR.